ISLANDIA, NY – More than six out of ten Americans (64%) support the recently enacted bankruptcy legislation, which makes it considerably more difficult for debtors to discharge their debts under Chapter 7 and will force more people to repay their debts under Chapter 13 filings, according to the Cambridge Consumer Credit Index. 36% of Americans are not in favor of the toughened bankruptcy rules. Though a clear majority of Americans are in favor of the new law, support for it has weakened from June 2003, when the Index found that 73% were in favor of toughened bankruptcy laws and 27% opposed it. The latest survey also found that 80% of Americans say the new law would deter them from filing for bankruptcy, while 20% would be more inclined to file for bankruptcy if they were overwhelmed with debt.
“The results of the Cambridge Consumer Index wildcard question show that support for the new bankruptcy law, while still strong, has been declining since the Index last asked the question two years ago. The biggest support for the law comes from white, older consumers with high incomes and more education, while the consumers who would be impacted the most-younger people with lower incomes and less education and blacks, are more opposed to toughening bankruptcy rules,” says Jordan Goodman, spokesperson and financial analyst for the Cambridge Consumer Credit Index.
The overall Cambridge Consumer Credit Index jumped 20 points from April to 71. The Index rose sharply on all three questions: past, present and future intensions. The “Reality Gap,” which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, soared to a record high 23 percentage points, up from 8 points in April. A month ago, 84% of Americans planned to pay off debt, while a month later only 61% actually did so.
According to Chris Viale, President and C.E.O. of Cambridge Credit Counseling Corp., “Debt is stressful for most Americans. It’s a harsh reality that bankruptcy has become a normal solution in our society for those who may experience a loss of a job or unexpected medical emergency. These situations often catapult them into serious debt that they think they cannot overcome. We encourage consumers to consider financial education and credit counseling as the step before considering bankruptcy.”
In conjunction with the Index, Cambridge Credit Counseling Corp. is releasing its monthly survey of people who have called in for credit counseling services over the past month. Cambridge representatives ask callers for the primary reason they found it necessary to get help with their debts. From the 254 people who answered, this was the order of their responses:
- My income has been reduced from a lower salary, less overtime or layoff (29.9%)
- I am frustrated with high bank rates and fees (26.4%)
- I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (17.3%)
- I got into too much debt by overspending (9.8%)
- Large medical expenses forced me to take on huge debts (6.7%)
- Other (4.7%)
- My lack of financial education caused me to take on too much debt (2.8%)
- Recently divorced or widowed (2.4%)
For more information on the survey see http://www.cambridgeconsumerindex.com/index.asp?content=client_survey.
The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt. It is released on the fifth business day of every month to coincide with the Federal Reserve Board’s G19 release of consumer credit outstanding data. These findings are the result of monthly nationwide telephone polls of more than 800 adults, conducted by ICR/International Communications Research The most recent survey was made last week, and was sponsored by the Debt Relief Clearinghouse. For more information about the Cambridge Consumer Credit Index, contact Paramjit Mahli at pmahli@cambridgeconsumerindex.com or 631-786-6450 or the Index website at http://www.cambridgeconsumerindex.com/.
